Press Release

iSuppli Issues Fast Facts on Potential Apple Acquisition of ARM

To support media coverage of Apple Inc.’s speculated merger acquisition of microprocessor Intellectual Property (IP) provider ARM Holdings, iSuppli Corp. is providing the following the fast facts and analysis:

Published reports speculate Apple could be considering a purchase of ARM Holdings, a leading supplier of semiconductor IP. The news reports surfaced on Wednesday, April 21, lifting ARM shares up about 7 percent. Responding to acquisition speculation, “Apple does not need to buy the company, they can just license technologies for less,” said Warren East, ARM chief executive officer, in an interview with British newspaper The Guardian.

The timing of this speculation is interesting because Google recently announced its IP-driven acquisition of Agnilux, a start-up founded by P.A. Semi professionals who left when that fabless chip designer was acquired by Apple in 2008.

ARM’s IP plays an important role in mobile devices, including the iPhone, iPod touch and iPad. ARM designs microprocessor circuits that are widely used because the company is a leader in power efficiency, delivering the most calculations for the fewest electrons. In 2009, ARM signed 87 new semiconductor IP licenses, bringing its total to 662. Interestingly, ARM estimates that every semiconductor company would need to spend between $50 million and $150 million annually to reproduce what ARM does. ARM-based chips can be found in the majority of mobile phones presently sold.

“Just because ARM’s IP plays an important role in mobile devices, that doesn’t necessarily mean ARM is of strategic value to Apple,” said William Kidd, director and principal analyst, financial services for iSuppli. “iSuppli thinks ARM would represent a costly acquisition with little in the way of true strategic benefits. The acquisition would not give Apple’s products a competitive edge/differentiating value. iSuppli also doesn’t buy into prevailing speculation that there could be significant value in denying other competitors access to ARM’s IP, since the majority of the impact would be felt by companies like Broadcom, Samsung and Texas Instruments, which are not exactly Apple’s biggest rivals. In any case, there would be no visible end-market impact seen for two years at a minimum.”

If Apple were to acquire ARM, iSuppli believes chip makers would worry about Apple’s inward-looking corporate style. “Many major semiconductor companies already have long and broad use of current ARM technology, and we suspect that their business engagement with ARM allows for future access as well. If you take this theory out further, it would be problematic for chipmakers to stop using ARM, not just because of their reliance on an ARM-designed microprocessors per se, but because redesigning the software/firmware of some baseband designs would be very time consuming and disruptive. We speculate that other ARM bidders could come out—but only if Apple truly emerges as a bidder,” Kidd added.

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